Argentina is refusing to pay the $20 million in ransom that New York hedge fund honcho Paul Singer is demanding in exchange for releasing the country’s premier naval vessel.

At a court hearing today in Ghana, where Singer’s lawyers are holding the ARA Libertad hostage, a lawyer for Argentina argued that Singer had no right to detain the ship because it’s a military vessel and immune from seizure.

Lawyer Larry Otoo called the seizure — a move by Singer to force Argentina to repay a $1.6 billion debt he says he’s owed — an embarrassment to Ghana and demanded the ship’s immediate return.

The court is expected to rule Thursday on whether to release the ship.

Singer, the head of hedge fund giant Elliot Management, is seeking to recoup some of the $600 million in bonds he purchased as Argentina was headed for default in 2001.

Elliot bought the bonds at steep discounts, paying as little as 15 cents on the dollar in some cases, but has since won judgments of as much as $1.6 billion.

Elliot’s NML Capital unit is pursuing Argentina’s assets all over the world in an effort to collect on its debt.

Ace Ankomah, a lawyer for NML, argued today that Argentina explicitly waived immunity when it issued the bonds and said NML might not be able to recover its debt if the vessel is permitted to leave Ghana.

Last week, NML convinced a court in Ghana to detain the ship as it docked at the port of Tema in Ghana’s capital of Accra.

A judge in Ghana ordered the seizure of the ship as part of a $280 million judgment NML was awarded in 2006 in Manhattan federal court.

NML has told Argentina it would accept $20 million in exchange for the ship, according to a person close to the negotiations.